Thursday, December 18, 2014

To Underscore The Urgency Of An Ebola Vaccine -- Just A Short Note

In an ironic twist of fate, a doctor in Sierra Leone who treated a banker he later learned was infected with Ebola, has died from the virus -- just hours after a Defryus drug called ZMab, arrived in country to be given to him.

It didn't thaw in time. Tragic -- per Reuters:

. . . .Victor Willoughby was diagnosed with Ebola last week after he treated a man with organ-related problems. The patient, a senior banker, was later diagnosed with Ebola and has since died. . . .

The drug, ZMab, was transported in frozen form on a Brussels Airlines flight that arrived overnight. Before it could thaw, Willoughby's condition deteriorated, said chief medical officer Brima Kargbo. . . .

As concerned scientists, we should all take heed -- and be warned. Now, let's get those clinical trials cranking.

Privately-Held Swiss Clinical Development Stage Oncology Company, OncoEthix, Purchased By Merck (For Up To $375 Million)

OncoEthix SA was funded (in part) by Index Ventures and endeavourvision, initially, and then SV Life Sciences and Edmond de Rothschild Investment Partners, in a July 2013 Series B round. It is a clinical stage biotechnology company. OncoEthix was formed in 2007 to develop a portfolio of several promising new drug candidates for cancer, primarily aimed at treating solid tumors. Now it belongs to Whitehouse Station. There will be no antitrust hiccups. That's a certainty.

From the Wall Street Journal, then -- a bit:

. . . .The deal includes an upfront payment of $110 million, and OncoEthix is eligible for additional milestone payments of up to $265 million, contingent upon clinical and regulatory approval.

Through the acquisition, Merck gains OTX015, a BET (bromodomain) inhibitor that is currently in Phase 1b studies for the treatment of advanced solid tumors. . . .

Clearly immaterial to Merck, but a good deal, nonetheless. It's a VERY nice payday for the venture investors named above, as well. Onward!

Wednesday, December 17, 2014

Just As Predicted, Judge Salas Has Promptly Entered The Distribution Order In ENHANCE Settlement, Today

As I said last Saturday, the very able Judge Ester Salas, in the federal District Courthouse in Newark, has entered the distribution order -- clearing the way for the $688 million federal securities law settlement (thanks going out here, to Ex S-P CEO Fred Hassan!) to be disbursed.

So ends that tale of greed, (alleged) obfuscation and ineptitude. From the order (and a link to the full-text PDF), then:

. . . .In order to encourage Authorized Claimants to promptly deposit their payments, all Initial Distribution checks shall bear the following notation: “DEPOSIT PROMPTLY, VOID AND SUBJECT TO RE-DISTRIBUTION IF NOT NEGOTIATED WITHIN 90 DAYS OF DISTRIBUTION.” Co-Lead Counsel and Epiq are authorized to take appropriate action to locate and/or contact any Authorized Claimant who has not cashed his, her, or its check within said time as detailed in footnote 5 of the Thurin Declaration. . . .

Authorized Claimants who do not negotiate their Initial Distribution checks within the time allotted or on the conditions set forth in footnote 5 of the Thurin Declaration shall irrevocably forfeit all recovery from the Settlement, and the funds allocated to all such stale-dated checks shall be available to be re-distributed to other Authorized Claimants in the Second Distribution described below. Similarly, Authorized Claimants, who do not negotiate subsequent distributions within the time allotted or on the conditions set forth in footnote 5 of the Thurin Declaration shall irrevocably forfeit any further recovery from the Net Settlement Fund. . . .

Do promptly cash your check -- to avoid forefeiture.

Tuesday, December 16, 2014

When You See History Marching Right Past You. . . Just Jump In Front, And PRETEND To Lead It: "Tennessee, Leading From Behind"

As I've repeatedly written for going on two years now, Tennessee's stubborn, wrong-headed failure to accept federal health care funding (in the form of a Medicaid expansion) for its poorest citizens -- all in some misguided "stand" against Obamacare -- was a deep disservice indeed, to the people who put Gov. Haslam in office.

He's finally seen the light. Or. . . the green, actually. In either case, I am thankful that people like Mr. Casteel (depicted, lower right) will have some minimal coverage, now. History had judged Tennessee's Republican majority to be in error. At least the Governor can now admit that. I don't care about the obvious sophistry of calling the expansion a different name -- the important thing is that his people will FINALLY get some coverage and benefits, all as envisioned by the ACA of 2010. Per Bloomberg, overnight, then:

. . . .The Obama administration supports in principle. . . . Indiana, Utah, Wyoming and Alaska [and now Tennessee] are [all] considering an expansion, at least 90 percent of which would be funded by the federal government.

All of the states cast their expansions as departures from the traditional Medicaid program, in which participants pay little or nothing toward their care and the government compensates most doctors and hospitals directly. Their modified programs would generally require individuals to bear more of the costs of their health care. It’s a compromise that lets state Republicans work with the Obama administration even though their party rejects the health-care law.

“We made the decision in Tennessee nearly two years ago not to expand traditional Medicaid,” Haslam said in a statement. “This plan leverages federal dollars to provide health care coverage to more Tennesseans, to give people a choice in their coverage and to address the cost of health care, better health outcomes. . . .”

It is not a Medicaid expansion -- if I say it is not. . . really, Mr. Haslam? Sheesh. It's an ugly win, to be sure -- but I'll take it! Carry onward! [More background here, here and here.]

Sunday, December 14, 2014

Settlement Conferences Continue -- In Delaware District Court -- Between Gilead and Merck/Idenix, On Sovaldi® Patent Spats

It would seem that the very capable Judge Christopher J. Burke, sitting in Delaware's federal District courthouse, would like to encourage the parties to settle the patent license royalty demands made by Merck, and echoed by Idenix, now that Merck owns Idenix.

You will recall that Merck has demanded a 10 per cent running royalty on all sales of Sovaldi® (sofosbuvir), under a patent that Merck claims teaches how compounds like Sovaldi are metabolized from a pro-drug, in the human body -- into a therapeutic drug (in this case) to cure Hep C. [The question would seem to be whether what the human body does naturally, to the pro-drug, to metabolize it, can be considered (all by itself to be) an invention worthy of patent protection.] In any event, here's the minute order of mid last week:
. . . .Judge Christopher J. Burke held a Settlement Teleconference on December 8, 2014. . . .

We will keep you informed, here on a nice quiet Sunday morning here -- fresh OJ, croissants and hot coffee. . . onward!

Saturday, December 13, 2014

Hospira Has Already Filed A Notice Of Appeal, From The Cubist Trial Court Patent Decision Of Monday

So, as I said early on Tuesday morning, this one is at least 18 months away from being resolved -- with any form of certainty. Here is a bit of the Hospira filing:

. . . .Notice is hereby given that Hospira, Inc., defendant in the above-captioned matter, hereby appeals to the United States Court of Appeals for the Federal Circuit from the Order of final judgment entered in this action on December 8, 2014 (D.I. 136), together with all underlying orders, rulings, and findings, including without limitation the “Order Construing the Terms of U.S. Patent Nos. 6,468,967; 6,852,689; 8,129,342; and RE 39,071” (D.I. 59), “Order Denying Defendant’s Letter Request to file a Motion for Summary Judgment” (D.I. 107), and “Memorandum Opinion” (D.I. 135). . . .

And that (perhaps 18 to 24 month time frame) assumes that there will be no additional appeals from any decision ultimately entered by the Federal Circuit.

As ever, we will keep an eye on it -- so stay tuned.

Ex-Schering-Plough CEO Fred Hassan's ENHANCE-Era Federal Securities Fraud Class Settlement (Of $688 Million!) Crawls To A Close

Earlier this past fall, the eminently capable Judge Cavanaugh retired from his seat on the bench of the federal District Court in Newark, New Jersey, which caused this matter, Genesee, et al. v. Schering-Plough (Cause No. 08-2177) to be reassigned by lot to Judge Salas.

All that remains to be done, now that the lone remaining objector to the settlement has withdrawn his appeal, and his appeal bond has been refunded to him, is for Judge Salas to sign the October 14, 2014 order starting the claims submission process. So the lead lawyers wrote and asked her to do just that, yesterday:

. . . .Specifically, on October 1, 2013, this Court entered an order approving the settlement of the above-captioned class action for $215,000,000. This order is final, as all appeals of the settlement have been withdrawn. On September 12, 2014, Lead Plaintiffs filed a Motion For Approval Of Distribution Plan, seeking the Court’s approval of a plan of distribution pursuant to which the settlement fund could be distributed to the Class. There is, of course, no objection to the plan and the Class is anxious (particularly at this time of year) for the settlement fund to be disbursed.

The fund, however, cannot be disbursed without execution of the order approving the distribution plan. I have enclosed an additional copy of the order for Your Honor’s convenience with this letter. As no one has objected to the Distribution Plan, we respectfully request that Your Honor enter the Order at the Court’s earliest convenience so that Lead Plaintiffs can cause the settlement fund to be disbursed to the Class. . . .

I would expect that the order (beginning the disbursement process) would be entered next week. Merry Christmas, a little early (or, four years late, if you prefer!) -- to one and all. I had earlier hoped that checks would arrive by Christmas of this year, but the return of the last remaining appeal bond took a bit, as did the re-assignment process, for the above mentioned retirement. Oh, and. . . Thanks again, Fred.

Thursday, December 11, 2014

Will A Double Dose Ebola Vaccine Be Practical -- In West Africa?

That's an eminently fair question to ask. Of course, J&J, and GSK, both well into development and testing with separate "prime, plus booster" regimens, at present, are arguing that the immunity from a double dosing will be more durable, longer term. I concur that is likely to be true, given past vaccine trial experiences, in other viral outbreaks.

The difficult reality, however, is that the health care system in some of these geographies is so strained, and the people so widely dispersed (without many reliable methods of recall and followup contact), a second dose might never be given in more than three quarters of the population. And that would mean the outbreak would not be contained, at all. Add to this, that J&J's booster component is required to be grown up in chicken eggs -- a notoriously difficult way to acheive the pandemic volumes needed for the booster. [Just ask Baxter about its 2010-2011 era avian flu vaccine experiences, here.]

It is true (as Reuters is reporting) that Merck's trial in Geneva, Switzerland is presently on hold -- while four cases (of 59) of joint pain are evaluated -- to be sure that the malady is temporary, and reversing. Even so -- Merck's vaccine candidate (so far) shows the strongest single dose immune response.

And a single dose regimen may be the only practical way to contain this -- and other -- outbreaks. It is just too hard to do follow-up for second dosings, on vast swaths of rural, low infrastructure, migrant populations. Populations like those now afflicted in West Africa. The UN public health organizations -- and Doctors Without Borders -- have seen this, over and over, again.

So (and all of this is just my opinion), assuming that the joint pain and stiffness is temporary, in the Merck/NewLink Genetics candidate, I think Merck's vaccine will be the one deployed in Sierra Leone, at least this time around. Such temporary stiffness is not all that uncommon a side effect -- of several vaccines, already on market. . . . so we should not be too terribly surprised to see it appear here.

Now, let us hope that it is temporary -- because the alternative candidates present some real logistical nightmares -- in most of Africa -- where they will be most sorely needed.

Wednesday, December 10, 2014

HHS Secretary Burwell Invokes PREP Act Immunity For Ebola Vaccine Makers -- Merck Included

While the HHS press release of yesterday only mentions NewLink Genetics, the PREP Act itself makes clear that those companies in Merck's shoes in this sort of a situation become "Covered Persons" -- under the Act's immunity provisions.

The Act's products liability immunity applies to “Covered Persons” -- with respect to administration or use of a "Covered Countermeasure". Covered Persons include manufacturers, distributors, program planners, and qualified persons, and their officials, agents, and employees, and the United States. The PREP Act goes on to define the terms “Manufacturer” and “Distributor”, thus: a "Manufacturer" includes a contractor or subcontractor of a manufacturer; a supplier or licenser of any product, intellectual property, service, research tool or component or other article used in the design, development, clinical testing, investigation or manufacturing of a Covered Countermeasure; and any or all of the parents, subsidiaries, affiliates, successors, and assigns of a Manufacturer. A "Distributor" means a person or entity engaged in the distribution of drug, biologics, or devices, including but not limited to: Manufacturers; repackers; common carriers; contract carriers; air carriers; own-label distributors; private-label distributors; jobbers; brokers; warehouses and wholesale drug warehouses; independent wholesale drug traders; and retail pharmacies. Both of these definitions would clearly apply to Merck's role in rVSV-ZEBOV candidate efficacy trials, ultimate vaccine conjugate manufacture and finished vaccine distribution.

And that makes sense. Here's the Secretary's press release of yesterday -- and a bit:

. . . .The PREP Act was designed to facilitate the development of medical countermeasures to respond to urgent public health needs, including the development of critical vaccines like those to prevent the spread of Ebola. This U.S. declaration under the PREP act is part of a global dialogue to address these issues in the U.S., and other countries where the vaccine is being developed, manufactured and potentially used.

“My strong hope in issuing this PREP Act declaration in the United States is that other nations will also enact appropriate liability protection and compensation legislation,” said Secretary Burwell. “As a global community, we must ensure that legitimate concerns about liability do not hold back the possibility of developing an Ebola vaccine, an essential strategy in our global response to the Ebola epidemic in West Africa.”

The PREP Act declaration is expected to strengthen the incentive to conduct research and spur development, manufacturing, and the potential use of the vaccines in large scale vaccination campaigns in West Africa. The PREP Act declaration provides legal protection under U.S. law for three vaccine candidates:

• GlaxoSmithKline’s Recombinant Replication Deficient Chimpanzee Adenovirus Type 3-Vectored Ebola Zaire Vaccine known as ChAd3-EBO-Z;

• the BPSC1001 vaccine, known as rVSV-ZEBOV-GP, made by BioProtection Services Corporation, a subsidiary of Newlink Genetics; and

• the Ad26.ZEBOV/MVA-BN-Filo vaccine manufactured by Janssen Corporation, subsidiary of Johnson & Johnson/Bavarian Nordic. . . .

This is a truly sound public policy decision, in my experienced view. Next up -- the first clinical efficacy head to head results will start trickling in, perhaps by mid-February 2015.

Gardasil 9® Gets FDA Approval Nod, Just As Dr. Gerberding Is Promoted "Up and Out" Of Merck's Vaccines Businesses

Dr. Gerberding certainly has earned the right to take a victory lap, as she is promoted -- and point toward this new approval as being her handiwork -- at the vaccines businesses helm.

While the vaccine now protects against a greater portion of cancer causing viral strains, it remains to be seen whether US vaccination rates will ever achieve the levels Merck had originally hoped for, in younger girls (and boys) when it started marketing the original version of quadrivalent Gardasil®. Here's a link to the FDA's announcement -- and a bit from it:

. . . .The U.S. Food and Drug Administration today approved Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) for the prevention of certain diseases caused by nine types of Human Papillomavirus (HPV). Covering nine HPV types, five more HPV types than Gardasil (previously approved by the FDA), Gardasil 9 has the potential to prevent approximately 90 percent of cervical, vulvar, vaginal and anal cancers.

Gardasil 9 is a vaccine approved for use in females ages 9 through 26 and males ages 9 through 15. It is approved for the prevention of cervical, vulvar, vaginal and anal cancers caused by HPV types 16, 18, 31, 33, 45, 52 and 58, and for the prevention of genital warts caused by HPV types 6 or 11. Gardasil 9 adds protection against five additional HPV types—31, 33, 45, 52 and 58— which cause approximately 20 percent of cervical cancers and are not covered by previously FDA-approved HPV vaccines.

“Vaccination is a critical public health measure for lowering the risk of most cervical, genital and anal cancers caused by HPV,” said Karen Midthun, M.D., director of the FDA’s Center for Biologics Evaluation and Research. “The approval of Gardasil 9 provides broader protection against HPV-related cancers. . . .

While this is clearly good news for Whitehouse Station, it is also clearly a product that will cannibalize almost all the old Gardasil revenue -- so it may not result in much incremental new revenue for the company. Now you know.

CDC's Former Chief Now Global Health Czar -- At Whitehouse Station: Promotion Makes Eminent Good Sense

I now suspect more than one of the "elite tier" of pharma and life science companies will soon follow suit, and unify the "compassionate science" sections of their businesses, under one global leader.

And Merck could not have found a finer leader, in this regard. She has served admirably, as the global head of the company's vaccines businesses, since 2010. From today's press release, reprinted by the Fort Mills Times then, a bit:

. . . .[She will now] be responsible for Merck’s global public policy, corporate responsibility and communications functions, as well as the Merck Foundation and the Merck for Mothers program. Gerberding will also lead new partnership initiatives that accelerate Merck’s ability to contribute to improved population health, a measure of impact that is increasingly valued by governments and other global health organizations.

"Julie has been instrumental in making Merck’s vaccines more accessible and affordable, particularly in emerging markets and many of the world’s most resource-limited countries,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “Julie’s leadership of our vaccines business and her exceptional track record in both the public and private sectors make her ideally suited to lead these areas and to advance our engagement with organizations around the world that, like Merck, are working to advance population health. . . .”

Onward, and upward!

Tuesday, December 9, 2014

Despite Hospira's Spin Doctoring, Cubist's Patents Held. . . Valid -- Through Late 2016 At Least

UPDATED @ 7:45 AM EST -- Merck has taken the rather unusual step of proactively commenting on the Hospira Cubist ruling in Delaware. And, as you'll see -- what I said prior to 6 AM EST still holds. Merck confirms the accuracy of mine, below. Merck will make very good money on this deal, and I'll separately predict that there will be no topping bid offered. It is a fully-priced tender offer. [End, updated portion.]

Yesterday afternoon, at the federal trial court level in Delaware, there were some developments in the Hospira v. Cubist Hatch-Waxman proceedings (Cause No. 12-367). The very able Judge Gregory M. Sleet entered a memorandum opinion late in the day yesterday. . . and overnight, much was made of Hospira's claim that at least four three of Cubist's daptomycin patents were invalidated. This cheer-leading was led by Hospira. The statement is true -- but is not remotely complete -- nor is it even close to the end of the story.

Indeed, far less has been written (thus far) about the one central Cubist patent -- RE '071 -- (belonging to Cubist, via a year 2000 Lilly exclusive license) which was held valid, and held to be infringed, by Hospira's actions, and ongoing attempts at commercialization -- of a generic daptomycin injection. Of course, this is exactly the sort of ordered litigation Hatch-Waxman envisioned. Indeed, settling -- in an orderly, courtly fashion -- whether a generic may enter the market, and when, reduces chaos for all concerned. I suppose Hospira could still attempt an "at-risk" launch, but that would be decidedly unwise, given Judge Skleet's opinion of yesterday. The full 47 page PDF is right here, so you may read it for yourself -- but willful patent infringement leads to treble damages, in these cases. And so -- we will wait for appeals, and additional motions, but here is the business end of the opinion:

. . . .For the reasons stated above, the court concludes that: (1) the Certificate of Correction issued for the RE'071 Patent is not invalid, and therefore Hospira's products infringe the RE'071 Patent; (2) the RE'071 Patent is not invalid for lack of written description; (3) the RE'071 Patent is not invalid for improper recapture; (4) a revision to the court's claim construction of the term "daptomycin" in the '967, '689, '238, and '342 Patents is not warranted, and therefore Hospira's products infringe the '967, '689, '238, and '342 Patents; (5) the '967, '689, '238, and '342 Patents are not invalid for lack of written description. . . .

Now you know. Of course there will be appeals (on both sides), and Strides and Fresenius are still circling Cubist, as well. As I've said, Teva already extracted a daptomycin patent settlement -- and we shall have to wait and see if Teva is ever able to enforce it. So in the mean time. . . keep calm and carry on. Busy day ahead. . .

Monday, December 8, 2014

No Antitrust Concerns Re Cubist: Remember That Vancomycin Is Now Available As A Generic, Too. . .

I've said a few times here that Merck will likely be granted early termination of the Hart-Scott waiting period, related to the all cash $102 per share Cubist tender offer deal launched this morning. I believe that because over 70 percent of Cubist's revenue comes from Cubicin®, and that market place is quite fragmented, as the Merck slide grab at right shows. And Merck has no direct offering here. Note that there are several different manufacturers of generic "Vank" -- all subsumed in that one large (72 per cent) chunk of the US 2014 pie. So, Merck's acquisition won't materially affect the marketplace.

I'll also note that Merck is likely to keep its current debt ratings, stable to improving, even after issuing about $9 billion -- in order to take the legacy Cubist financing structure out. Merck will directly assume about $1 billion of Cubist's debt, and likely drop the interest rate on the whole $9 billion financing, near term. Sharp CFO-level management, that.

So -- this is a smart speedy deal, all the way round in my view. Kudos to all involved! [And I must grin, given that DeutscheBank got a chunk of the Merck M&A advisory and debt work. Shocking. Not.]

Only Scant Antitrust Concerns -- Merck's Definitive $102/Share, Offered In Cash -- For Cubist

So the rumor -- is a fact, now. [Some ideas, from my "down and dirty" Sunday coffee due diligence file, here -- but the price will now be around $7.9 billion all in, to Merck -- and that's still a very good deal for Whitehouse Station.]

Moreover, Merck will have no trouble completing the tender offer -- as this is also a great, fully priced offer, to the Cubist shareholders. And there are only a few (very little) antitrust wrinkles, so this should close on time, and on target. Here's a bit from Whitehouse Station, just now:

. . . .Unanimously approved by the boards of directors of both companies, the transaction has an equity valuation of $8.4 billion and will also include $1.1 billion in net debt (based on projected cash balances) and other considerations for a total transaction value of approximately $9.5 billion. . . .

Merck believes now is an optimal time to significantly grow its hospital acute care presence because of the positive regulatory and reimbursement trends in the hospital setting and the increasingly important role that hospitals are expected to provide in healthcare overall. . . .

Under the terms of the agreement, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Cubist Pharmaceuticals, Inc. The closing of the tender offer will be subject to certain conditions, including the tender of shares representing at least a majority of the total number of Cubist’s outstanding shares (assuming the exercise of all options), the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Upon the completion of the tender offer, Merck will acquire all remaining shares through a second-step merger without the need for a stockholder vote under Delaware law. The companies expect the transaction to close in the first quarter of 2015. . . .

We will keep you posted here -- listening in, on the webcast/call now. . . .

UPDATED: Because the MRSA antibiotic world is so fragmented (though Cubicin is the clear leader, here -- on track for $2 billion a year in sales for 2017 and beyond -- as its patents get renewed and extended), and the emerging clostridium difficile treatments include non-drug options (um. . . purified stool implants, and now, even capsules, ick!), there will be almost no Hart-Scott issues. I predict an early termination of the Hart-Scott waiting period. Smooth sailing, from here.

Sunday, December 7, 2014

Some Preliminary Due Diligence Items -- That Might Well Reduce The "Net Price" Merck Ultimately Pays For Cubist

Just for grins. . . over my Sunday morning OJ, coffee and cherry yogurt (and a ripe banana!), I read just a little bit about Cubist's existing SEC disclosed contractual relationships -- primarily involving the way it makes Cubicin® (daptomycin). Cubist licensed the rights to make and sell drugs containing daptomycin as an active ingredient, from Eli Lilly & Co., over 14 years ago, now.

Through the end of last year, Cubist had paid Lilly almost $590 million in royalties on Cubicin. I strongly suspect that should Merck decide to acquire Cubist, given the number of new patents, and follow-on "evergreening" patent applications Cubist now holds on variations of the compounds, Merck might secure a reduction in the amounts paid to Lilly, going forward. Perhaps a significant reduction, too. [And that would lower the effective price Merck paid. A similar reduction might well be had -- with Novartis, as successor to Chiron, on other Cubist antibiotic licenses and manufacturing agreements.]

In addition, Cubist sources the vast majority of its API for daptomycin from one supplier -- ACS Dobfar, S.p.A. It is highly likely, given that the ACS Dobfar supply agreement is now terminable at year end 2014, Merck could make the API directly, or source it less expensively -- than this current EU-based provider. APIs are the "raw materials" -- for making this antibiotic. Again, significant reductions in the costs of raw materials will drive down the effective price Merck pays for Cubist.

Finally, Merck may well start to play much rougher with Teva (Teva has an "authorized generic" deal with Cubist for daptomycin) -- perhaps even arguing that the deal violates FTC pay to delay rules. There are others circling, including Hospira and Strides, that are trying to invalidate Cubist's patent position, and sell a generic version of one or more Cubist antibiotics. With Merck's "early 1980s era Schwartzenegger" rippling legal muscles, Cubist will be a much more formidable opponent in these pieces of litigation. Here, size. . . matters. No longer will these once larger rivals be able to bludgeon capitulation from tiny Cubist (by threat of years upon years of $50 million legal fees spent, per product, per dispute) -- no, Merck will end almost all of that nonsense. Again, such a muscular stance will, in the longer run, greatly enhance the margin Cubist might retain on its branded products.

So -- without additional fanfare, here are my diligence notes, with links, embedded (it is just a "quick first glance" rundown):
. . . .Novartis, under the October 2013 amendments to the 2003 Chiron license agreement: After the acquisition of Chiron by Novartis, in 2006, the license agreement and manufacturing and supply agreement were assigned to a subsidiary of Novartis.

In the United Kingdom, France, Germany, Italy, Romania, Spain, Switzerland, and Greece Novartis gets additional payments and rights if Cubist subsequently launches a tedizolid containing product. In addition, if Cubist launches a combinaiton product in the above geographies containing tedizolid, and Cubicin (daptomycin), Novartis will be credited with a rebate to its sales (relieved of a portion of its) royalty obligations on all of Novartis's sales of the drugs. . . .

Eli Lilly & Co. -- per latest SEC Form 10-K:

Cubist is required to pay royalties to Eli Lilly on worldwide sales of Cubicin. In July 2003 and March 2005, Cubist entered into amendments to the restated license agreement and issued to Eli Lilly an aggregate 2,599,792 shares of common stock valued at an aggregate of $28.0 million in consideration for single-digit reductions in the royalty rates payable to Eli Lilly. In September 2003, Cubist issued 38,922 shares of common stock valued at $0.5 million as a milestone payment to Eli Lilly upon Cubist receiving FDA approval for the commercial sale of Cubicin. The aggregate payments of $28.5 million were recorded as intangible assets within the consolidated balance sheets and are being amortized through 2016, which was the estimated remaining life of the license agreement with Eli Lilly on the dates of the transactions. The amortization of these intangible assets is included in cost of product revenues within the consolidated statements of income.

As of December 31, 2013, in addition to the milestone payments made in stock, Cubist has made payments to Eli Lilly of approximately $588.6 million for royalties on sales of Cubicin, which were paid in cash. Unless terminated earlier in accordance with its terms, Cubist's license agreement with Eli Lilly expires on the later of: (a) the expiration of the last-to-expire of the patents assigned or licensed under the agreement; and (b) the end of the tenth year from the date of first sale of Cubicin in any of the U.S., Canada, Japan, the United Kingdom, or UK, Germany, France, Italy, Spain, Switzerland, Netherlands or Belgium in which know-how royalties are due under the agreement. . . .

ACS Dobfar S.p.A -- API contract on Cubicin (most recent 10-K):

Cubist must purchase a certain percentage of its requirements for Cubicin API from ACSD, and we pay ACSD for Cubicin API based upon a volume-based pricing schedule. Our agreement with ACSD is currently set to expire on December 31, 2015, but will extend for an additional two-year term, provided that we negotiate in good faith a revision to the prices charged for Cubicin API based on ACSD's then current costs to manufacture Cubicin API unless: (a) the agreement is earlier terminated in accordance with its terms; or (b) we notify ACSD by December 31, 2014, that we do not desire to extend the term. . . .

Teva (most recent SEC Form 10-K) --

Teva's patent infringement settlement agreement also provides that, for the period that Cubist's license to Teva is in effect, Teva will purchase its U.S. requirements of daptomycin for injection exclusively from us. We are required to use commercially reasonable efforts to satisfy Teva's requirements. The supply terms provide that we will receive payments from Teva for product supplied by us reflecting two components: one based on the cost of product revenues plus a margin, and the other based on a specified percentage of gross margin (referred to as net profit in the supply terms) from Teva's sales of daptomycin supplied by us. The supply terms also provide for a forecasting and ordering mechanism, and that Teva will determine the price at which any such daptomycin for injection will be resold and the trademark and name under which it is sold, which may not be confusingly similar to our trademarks. In addition, under the supply terms, Teva may instead supply on its own or from a third party and sell its generic daptomycin for injection product in the event of specified Cubist supply failures or if the arrangement is terminated due to our uncured breach or bankruptcy.

The settlement agreement will remain in effect until the expiration of the term of the license granted by us to Teva and the expiration of a non-exclusive, royalty-free license granted by Teva to us under any Teva U.S. patent rights that Teva has the right to license and that may be applicable to Cubicin and the daptomycin for injection product to be supplied by us to Teva. Each of us and Teva may terminate the settlement agreement in the event of a material breach by the other party. In addition, each party may terminate the license granted by it to the other party in the event of a challenge of the licensed patents by the other party. The Federal Trade Commission, or FTC, or the Department of Justice, or DOJ, could seek to challenge our settlement with Teva, or a competitor, customer or other third-party could initiate a private action under antitrust or other laws challenging our settlement with Teva. . . .

I may look some more, or I may offer additional analysis on these details, should we read a definitive press statement from either of the companies involved, come Monday. Off to cut and trim a tree. Be excellent to one another.

Saturday, December 6, 2014

At ASH, BMS's Opdivo® (Nivolumab) Outshines Merck's Keytruda® (Pembrolizumab) In Hodgkin's Lymphoma

It is still pretty early-on, in these particular clinical trial processes, and only partial results are available from the ongoing trials (i.e., not remotely complete) -- so the data sets are smallish -- and, I suppose, in fairness -- they could reverse, as the deeper results sets are tallied. But on the current partial results at ASH, this weekend, it looks like nivolumab, branded as Opdivo® by BMS, is pulling away from Merck's Keytruda®. Both are broad-acting anti PD-1 oncology agents. Both have shown revolutionary effectiveness in a surprisingly wide range of cancers. But nivolumab may be showing more robust efficacy here, just as we predicted about a half-year ago, now.

In any event, here's the erstwhile John Carroll's take, for FierceBiotech, on the ground in San Francisco, at ASH:

. . . .Bristol-Myers' Opdivo could start breaking away from Merck's drug with better efficacy results. Bristol has achieved an 87% response rate in an early Hodgkin lymphoma study of its own. . . .

For Bristol-Myers' Opdivo (nivolumab, the 87% response rate broke down into a 17% complete response rate with 70% achieving a partial response. 13% experienced stable disease. "Of the patients who achieved a complete and partial response, 60% (n=12) had their first response within eight weeks (range: 3-39 weeks), investigators reported. "Data from the study also showed a progression-free survival rate of 86% at 24 weeks, meaning patients lived six months longer without their disease worsening. . . ."

Obviously, there are a range of studies -- on other cancers -- underway. And so, the results will be manifold, in the coming months, but we will stick with our prediction that BMS wins the day, here. A great evening up north here, to stay warm by the fire. . . so I will. . . .

Pete Loftus, at the WSJ, Hears That Merck May "Bolt On Acquire" Cubist, For Around $8 Billion

Obviously. . . nothing at all has been announced by either company (so consider this a well-sourced, double confirmed. . . overnight rumor), but Cubist is already partnering with Merck in Japan, selling its lead product, Cubicin® (a ground-breaking new approach to treating the deadly Staph aureus, often hospital-acquired, and thus more than occasionally conventional drug-resistant), there. And, from first hand experiences with my youngest when he was 11, I can report that S. aureus is a very dangerous bug. So this is a market in which premium pricing might easily prevail. Some independent analysts' reports project that the Cubicin franchise will be the leading antibacterial -- by sales volume -- worldwide -- by 2017.

In addition, as we think about Merck's strategic interest here, we would note that Cubist already has on market a fine Clostridium difficile drug [Merck's offering in that space Actoxumab/bezlotoxumab (MK-3415A) is not yet approved by FDA, my regular readers will recall], and Cubist has acquired rights to another very promising Clostridium difficile Phase II candidate, via a recent smallish acquisition it made, itself -- of Optimer Pharmaceuticals.

So, yes -- I think this rumor has legs -- Pete has a really excellent track record, regularly and accurately running down, and double sourcing, pending M&A deals in the life sciences space, pre-announcement -- so I bet he has this one just about. . . right. We might well know by this coming Monday, or late Sunday night, even. Does Cubist's board have a meeting scheduled this weekend? Anyone? Anyone?

Even with the excellent financial performance by Cubist, of late -- IF (and that is a big "if") Merck is paying something like seven times sales. . . that is a rather frothy valuation -- even for Whitehouse Station -- a company with as strong a balance sheet, and as deep pockets, as Merck. Of course, we may yet learn that the "net price" for the rumored deal is closer to five times sales, once all the ancillary deals are disclosed, vetted and factored in to the final and netted price. That would be my guess, here. But it is a pure guess, based only on the fact that Mr. Frazier is a very disciplined bidder, and he has no need to overpay here. Now we wait, for some announcement. Here's a bit from Pete's -- in the mean time (do go read it all, at the WSJ):

. . . .Merck would pay about $100 per share for Cubist, one of the people said. That’s roughly 34% over Cubist’s closing price Friday of $74.36.

Cubist specializes in drugs to treat infectious diseases and other conditions, primarily in a hospital setting. Its flagship drug is Cubicin, an intravenous antibiotic used to treat serious infections that had $967 million in sales in 2013. Analysts expect sales of the drug will continue to rise in coming years.

Antibiotics traditionally hasn’t been considered one of the drug industry’s most lucrative areas, but some analysts believe new versions could garner higher prices as it becomes more important for hospitals to reduce infections and as resistance to traditional antibiotics grows. . . .

In closing, I will note that Clostridium difficile drug franchises may face the reality that purified stool implants (or more recently, carefully insulated oral capsules!) solve the same problem at a fraction of the drugs' costs (see archive graphic, lower right). Just so you know. I think though, Merck is after the S. aureus, Cubicin rights, worldwide. That's a free standing soon-to-be-multi-blockbuster franchise.

I suppose I should also say that clearing Hart-Scott, or antitrust review in the EU, and/or Japan -- will not likely pose any real problem here.

Friday, December 5, 2014

Since Merial Merck JV Is Long Defunct, Merial Buying Merck's Barceloneta Puerto Rico AH Facility

The post Schering-Plough antitrust problems with this old and convoluted joint venture idea were insurmountable. That caused the deal's demise, in March 2011.

But Heartgard chewables are still made there, and at least 200 workers will keep their jobs. Earlier it looked like Merck might close the facility on the island, due to tax haven law changes, in 2010. So this is good news. Per Pharmalot, and Pharmabiz, respectively:

. . . ."The Barceloneta manufacturing operation aligns well with Sanofi and Merial's global business and manufacturing strategies," said Merial CEO and Sanofi EVP Carsten Hellmann. "This addition to Merial's global manufacturing network, which spans nine countries, enables Merial to further extend its global production capabilities to deliver high-quality and innovative medicines that enhance the health and well-being of animals. We look forward to assuming responsibility for this global production site and welcoming its experienced employees to Merial."

The formulation and packaging operations of the site were put up for sale by Merck. The Barceloneta production facility has been involved in and will maintain responsibility for manufacturing and packaging Merial's industry-leading Heartgard and Heartgard Plus products. . . .

So it goes -- gray Friday here, but be of good cheer. . . and trust that the 200 families in Puerto Rico are, as of today!

Wednesday, December 3, 2014

The Ethics Of The Coming Head To Head Ebola Vaccine Candidates Trial: NYT's "Room For Debate"

The ethics of running clinical trials are complicated where -- as here -- there is a real probablity that the vaccine will work, and more than a few people will die, if given only a placebo. This is likely a primary factor driving the January 2015 head-to-head clinical trial protocols. It is likely that the first 100 or so patients will be randomized into either the GSK or the Merck vaccine candidate inoculation.

If, at a few weeks, both show strong immunity (while others in Sierra Leone continue to perish, in the same community, untreated), then there will be no need for a placebo arm. And if the GSK vaccine is less powerful, and durable than Merck's, all futue patients will receive. . . that's right, Merck's vaccine candidate. But we shall see.

[And separately, I'll note that our 44th President is dedicating new resources to both the vaccine effort for, and triage/treatment of the ebola patients, worldwide. It is -- of course -- the right thing to do. Kudos!]

Back to the central topic then -- here's the "Room for Debate" item, in the Gray Lady -- which set me to thinking about all of this, and a bit:

. . . .is it ethical for the drugs to be given in randomized, controlled trials — considered the gold standard in methodology — since that would require some patients to take placebos?

In West Africa, for example, the first 40 Ebola patients in a trial could all get an experimental treatment, and nobody would take a placebo. If nearly all patients survived, in settings where most others were dying with the same supportive care, then it is possible that placebo testing could be avoided, and subsequent trials could randomize to different doses or treatments. . . .

Be excellent to one another out there, today. Be nicer than you. . . really need. . . to be.

Tuesday, December 2, 2014

More Gloss, On Merck's Ebola Vaccine Candidate: Up Next, Head To Head Efficacy Trials Against GSK's

The $50 million ($30 million in upfronts) purchase from NewLink looks to have been a very astute move. . . even if Merck never reaps gargantuan monetary profit from the effort. There will certainly be great reputational benefits (lasting decades, indeed), to Whitehuse Station, if it is the first to conquer this current and horrific Ebola outbreak. 16,000 already infected; 6,000 already. . . gone. Oh my. [Backgrounder here.]

From the United Kingdom's DailyMail online then -- a bit; but do go read it all:

. . . . The first people vaccinated with an experimental Ebola shot being developed by Merck and NewLink have had no serious side effects so far, but a few experienced mild fever, Swiss researchers said on Tuesday. . . . [rVSV-ZEBOV] is undergoing initial human safety tests at the University Hospitals of Geneva. . . .

Since 10 November, 34 volunteers have been vaccinated with the shot, known as rVSV-ZEBOV Ebola vaccine, at the request of the World Health Organization (WHO). Trials have also begun in the United States, Canada, Germany and Gabon, and similar trials should start soon in Kenya. . . .

We will keep close tabs on this for the readership. Count on that.